SE Asian firm slow to reform, WB says

SE Asian firm slow to reform, WB says

WASHINGTON (DPA): Southeast Asia is lagging behind in measures to reform its private sector and growth could suffer as foreign direct investment moves to more favorable business environments, said a World Bank senior official.

In an interview with Deutsche Press-Agentur, dpa, International Finance Corporation head Peter Woicke had harsh words for the "Asian Tigers" as they have failed to follow through on reforms following the 1997 Asian finance crisis.

He said investment conditions in emerging markets were less favorable than a couple years ago and continuing legal hurdles and reluctance from company owners to reform would hurt business prospects in the long run.

"I think we're somewhat disappointed about the pace of reforms, the pace of restructuring by companies in Asia. I think these Asian countries were hoping to outgrow their problems, they had very high growth after Asian crisis.

"But with the U.S. economy slowing down... I think these countries are facing some restructuring to be done," said Woicke, who was chairman of J.P. Morgan Securities in Asia, based in Singapore, before he took the job at IFC.

"Asia at some point will have to bite the bullet and engage in some serious restructuring," he said.

The IFC, which as the private investment arm of the World Bank, invests directly in companies or the finance sector, has invested 33 per cent of its approximately 3 billion dollar portfolio in East Asia.

Woicke said it has been "very, very difficult" to restructure companies in Thailand mostly due to reluctance by company owners who often bring lawsuits against the IFC to fight the changes it demands.

In Indonesia, foreign investment has fled because the country's judiciary is in shambles, said Woicke, who called it a "classical case" for IFC involvement because private investors are staying away.

"The judicial system just doesn't work well enough to give creditors the rights they should have. The hassle which we're facing in some of these countries is disappointing, frustrating and in the end doesn't help the local banking system."

Woicke said the IFC was no longer involved in South Korea after it invested heavily in 1998 to pull the country out of the finance crisis. He said private investment flows had returned to Korea but the country needed to continue with reforms.

He said China was a bright spot in the region because he was moving forward with crucial private sector reforms.

"The country I'm extremely enthusiastic about is China. It is recognizing how important the private sector is.

"China continues to receive a lot of foreign direct investment. It is creating worry in Southeast Asia that China is receiving all of foreign direct investment, and less will be left for the rest of the region."